4 Apr 2013

Condo Ownership 101: Reserve Documents #2

Posted by Orlando HOA Services

This is all about your Reserves.

ReservesYour main report for Reserves is your Reserve Study. It lists all of the components that it is the Associations responsibility to maintain, when it will need replaced, and the projected cost to replace it. It will also state what percent of the Reserve Study is funded. You want the study to be at least 75% funded. There should also be a 30-year projected report. That report projects what will need to be spent and when on what component and whether or not the money will be there based on current financial practices. 

Case in point: most roofs have a 20 to 25-year lifespan. If that lifespan is up in 5 years, but with current financial practices the money won’t be there for 7 years, you’re looking at either a special assessment or bad roofs for 2 years, probably with costly roof repairs. Also, roofs are not usually repaired until there is a leak. One usually doesn’t notice a leak until it’s bad enough to find its way from the roof, through the attic space, and through the ceiling. That means possible damage to the roof underpinnings, escalating the cost of replacement. Before I came on the board of my HOA, they had been ignoring damaged roofs for 5 years. We have 17 roofs in our complex. Each roof cost on average an extra $3,000 to repair because of internal damage. That was a big ouch. Fortunately, we had the money in reserves, and there was no special assessment. 

The lesson here is, make sure the reserve fund will be there when large replacements are due to avoid costly special assessments.

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